Boeing chair talks certification 'reform', stands with Muilenburg

The chair of Boeing's board of directors conceded this week that the US aircraft certification processes needs "reform", though industry analysts remain uncertain what changes might be in store for the Federal Aviation Administration (FAA).

The chair of Boeing's board of directors conceded this week that the US aircraft certification processes needs "reform", though industry analysts remain uncertain what changes might be in store for the Federal Aviation Administration (FAA).

"Reform will happen. Reform has to happen," Boeing's board chair Dave Calhoun told CNBC on 5 November when asked about the effectiveness of the FAA's certification process. "The system let everybody down."

Calhoun made those statements during a lengthy interview during which he also threw his support behind Boeing chief executive Dennis Muilenburg, who last week faced a grilling by US lawmakers during House and Senate hearings.

Calhoun said Muilenburg agreed to forgo much of his salary until the 737 Max returns to service, and insists the company stands behind the CEO's ability to lead Boeing out of what amounts perhaps the most-dire crisis of its history.

"Dennis didn't create this problem… He is an asset," Calhoun said of Muilenburg. "From the beginning, he knew MCAS should and could be done better. He has led a programme to rewrite MCAS… He has done that incredibly well."

Calhoun declined to say how long Muilenburg might remain at Boeing's helm, but says, "To date… he has our full confidence".

Those words came amid much speculation that Muilenburg's time with Boeing might be short, especially considering the company already replaced the head of its commercial aircraft division. Speculation gained momentum during last week's hearings, during which several lawmakers admonished Muilenburg and questioned his leadership.

Calhoun says Muilenburg called him last week "with the purpose of suggesting he not take any income in 2019 in the form of bonuses" – the bulk of his compensation.

Boeing also says Muilenburg "committed to donating the entire value of any previous equity grants that vest in 2020", Boeing says.

In 2019, the Boeing chief earned total compensation of $23.4 million, of which $1.7 million was salary. The balance included $7.3 million in stock awards, $13.1 million in incentive plan compensation and another $1.3 million worth of retirement contribution and various benefits, according to Boeing regulatory filings.

In saying that the US aircraft certification process needs reform, Calhoun waded into a controversial discussion.

The FAA certificates aircraft using a delegation process under which it appoints manufacturers and employees at manufacturers to oversee some aspects of certification.

Boeing and other aerospace companies have defended that process as helping move new technology, including new safety features, through certification. They say company engineers best understand new technology, and are therefore uniquely suited to ensure technology meets certification standards.

"Delegation of authority, over a fairly lengthy period of time, has delivered incredibly strong results. The safety record shows that," Calhoun said.

The FAA's former acting administrator Dan Elwell has also defended the delegation process, saying the FAA would otherwise need billions of dollars in additional funding and thousands more employees.

Industry analysts agree the delegate process has benefits, and they do not see it going away. But, they say it can be improved by giving the FAA resources needed to intervene when necessary.

"That is to say, the resources to hire people who can go in and occasionally do spot checks, and the authority to find or call attention to any cases where they are not [following] the rules", says aerospace analyst Richard Aboulafia from consultancy Teal Group.

Congress could potentially mandate changes, but Aboulafia notes that under President Donald Trump the US government has shifted away from regulation.

"There needs to be a conversation about the resources and independence of government regulators," Aboulafia says.

Michel Merluzeau, an industry analyst with AIR, thinks certification could be improved by ensuring the FAA's private-sector delegates work independently of company business pressures. Boeing has already taken a step in that director, having recently shifted reporting lines so that engineers report to a chief engineer, not business unit heads.

Merluzeau also thinks the FAA should consider tapping the private sector to help with certain aspects of certification. Another perspective might help identify potential issues that would otherwise go unnoticed, he suggests.

"It's good to have another person… That's why I think a third party could help," he says. "Either you empower the people at Boeing… or, you say the FAA will work with a third party to audit the system, if necessary."

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